“Ethical fading”: not just a convenient label

It’s not immediately obvious what VW, The Labour Party and the South Yorkshire police have in common. Up close though, the similarities are only too clear.

All three are currently experiencing serious cases of ethical fading. The latter, described in more detail in a recent post here, occurs when people do not realise they’re facing an ethical issue needing ethical judgement.

Ethical fading is not merely a label for adverse and often highly damaging behaviour. In the real world it can lead directly to people treating an important ethical situation as a mere technicality, to be “handled” in some none-too demanding way.

All three of the above institutions have suffered from this. We have been witnessing ethical fading at work before our very eyes.

First, at VW the emission scandal continues to be treated as if no real ethical issues are involved. For example, the company’s latest excessive remuneration for those at top shows little recognition of the serious ethical nature of what the company did.

VW’s board has hardly anything to say about how the 11 million cars came to be fitted with cheating software. Instead, it continues to behave as if the company is still a model of technical excellence and therefore those at the top must be paid accordingly.

So the board has blithely rewarded itself and its senior personnel with hefty pay-outs, as if nothing that has already happened really matters.

In particular, the CEO who presided over the emissions cheating and later resigned, receives a £9.3m termination package on top of a pay award over £7 million.

Not much sign of ethical awareness then. Nobody at the top of VW seems to see its current actions as questionable or even unethical. “A technical problem” is how the company saw the cheating software in 2012 when questioned about the emissions data.

The company continues to hold this view, rather than accepting it is now at the heart of re-establishing the company’s reputation for integrity, trustworthiness and transparency. Ethical fading is alive and well at VW.

Secondly, the Labour Party too has found itself in the centre of a storm about racism, partly of its own making. Ethical fading has meant the leadership, and that includes Mr Corbyn, has apparently been reluctant to tackle issues of racism, preferring to see instead the more technical issue of an alleged conspiracy against the leadership.

Ethical fading and a reluctance to see racism for what it is, prevented the party belatedly addressing the behaviour of a favoured member in the form of Ken Livingstone.

Someone who manages to claim Hitler was a secret Zionist has clearly lost the plot, and is suffering from a severe case of ethical fading. He simply cannot see his stance as racist and that is exactly what ethical fading is all about.

Racial insensitivity or a bad case of ethical fading has marked Livingstone’s actions in recent years, despite the vigour with which he has claimed not to tolerate racism. As one commentator has put it, inadvertently describing ethical fading in action:

“Perhaps he has simply lost sight of how it looks outside the circle—once fringe now mainstream in the Labour party—in which he moved.” Having failed to address the ethical issues involved, the party now needs radical surgery.

Thirdly, the record of the South Yorkshire police mainly speaks for itself. Ethical fading has led it to consistently fail to address serious issues of lying about the Hillsborough events, pressurising the families of victims, and not seeing its own defensiveness concerning tackling child abuse in Rochdale as both legally and ethically wrong.

Instead, police actions have been internalised. This is a bureaucracy bent on avoiding the challenge of seriously addressing the ethics involved. Rather there has been a continuous defence of its interests against outside pressures and criticism

This serious dose of ethical fading has now begun to unravel, with the suspension of the chief constable and his immediate replacement. There are ever louder calls demanding the entire force be disbanded–the kind of remedy to ethical fading that may need to occur.

Sometimes only a complete change will do

Some years back Siemens faced a devastating expose about its unethical and illegal sales practices—eventually paying $1.6 billion in fines. For a while the company’s board refused to face up to the ethical implications.

Yet throughout the unravelling of the story of bribery and other unethical practices, Siemens employees reportedly felt the corruption scandal represented a failure of leadership. They were shocked and ashamed, because they were proud to be part of this company.

A new chief executive from outside the company who clearly did not suffer from ethical fading, promptly replaced about 80% of the top level of executives, 70% of the next level down, and 40% of the level below that.

How the managing board made decisions was also radically altered and four-fifths of the members had to leave. Only something as drastic as these steps would end the negative power of ethical fading and re-focus energies on returning a once-proud company to acting with integrity and to starting doing the right thing.

Olympus board bows in apology to shareholders

Likewise, the behaviour of the entire board of Olympus in Japan indulged in blanket denial that serious ethical issues were being raised by its chief executive. Yet in 2012 the same board came to admit it had falsified its accounts to cover up huge losses incurred through bad investments dating back to the 1990s.

The company’s former chairman, Tsuyoshi Kikukawa, and two top lieutenants pleaded guilty to fraud. Eventually, in a saga due to be made into a feature film, the entire ethically blind board ceased to be members and a new board was appointed.

Ethical fading in perspective

In every company, leaders face regular tests of their values and exercise of judgement. Too often we encounter CEOs expressing shock or surprise at some unethical revelation that appears to threaten their company’s reputation.

How do companies insulate themselves from the ethical fading phenomenon? The most successful step is to transform the decision making process used throughout an organisation. The change required is the introduction of a mandatory “ethical filter” in which every decision must be tested for its potential ethical implications.

Just asking some basic questions about an impending decision such as “does this have any ethical implications for us” is a step in the right direction. Others go further and ask “how would we feel if this issue appeared on the front pages of the national and international media?”

Similarly asking whether one would be proud to explain the decision to family members and others that matter personally to the decision makers can also prove a salutary check on how choices are made.

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